Sharing SME claims information

Norwich Union Healthcare has traditionally priced SME schemes using a number of factors including: age profile, membership, underwriting and location. We generally only use claims experience for pricing new business when assessing risks covering 100+ lives. On average, the larger group size the greater relevance of the claims experience. Due to the small premium associated with smaller SME schemes, and the impact one large claim could have on the scheme’s loss-ratio, there would be considerable pricing volatility if the scheme’s individual claims experience were used as the main mechanism to price the risk.

Therefore, Norwich Union Healthcare customers with less than 100 lives will generally receive a premium increase based on: membership and age profile changes; medical inflation; and the performance of Norwich Union Healthcare’s total SME portfolio.

While some cross-subsidy may exist, this approach, coupled with our expert claims management, has enabled us to control our premium increases, and maintain consistently high customer retention rates.

Norwich Union Healthcare does not generally share SME claims information with its competitors as in our experience the current situation (with some insurers sharing claims experience and others not) has led to competitors “cherry-picking” the best risks which, if it continued over time, could have an adverse effect on our whole SME customer base. This situation gives insurers with large in-force portfolios little incentive to share data. Without the full picture, it’s impossible to assess whether a scheme’s claims experience has changed as a result of a reduction in claims, or increased membership profile for example.

In order to facilitate this, the information shared would need to be formalised to include details such as the nature of each claim, the membership profile and the amount of claims paid over the past three to five years – all contributing to the intermediary’s already heavy administration burden.

Norwich Union Healthcare is committed to offering our SME customers flexible solutions that meet their changing needs, and welcomes any market changes that directly benefit the customer.

However, in the case of sharing SME claims experience, we believe that any benefit would only be truly realised if every insurer adopted the same approach.

At Bupa, we are committed to giving our members the best possible cover and delivering value for money.

Bupa prioritises client confidentiality and always endeavours to spend our members’ money in a responsible and beneficial way. For smaller businesses, community rating is our chosen approach for pricing as this means risk is shared by all SME customers, resulting in a fairer and more appropriate system of moderated subscription increases and decreases.

The moderated increase means those customers who have experienced large claims within their membership period will not be heavily penalised with a large increase to their renewal subscription, whilst companies who have made limited or no claims will also gain from a decrease in their subscription. All Bupa customers are notified of the community rated pricing scheme at the time of quotation for virgin and renewal customers, and it is typical of any kind of insurance pricing policy (including car and home).

Bupa’s pricing policy is influenced by our customer’s loss ratio value, not just their claims history, therefore disclosing our customer’s detailed claims information would not be appropriate.

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